Macro events & news for January 08, 2016

January 8, 2016

FX News Today

German trade surplus narrowed slightly in November. Germany posted a trade surplus of EUR 19.7 bln in November, down from EUR 20.5 bln in the previous month. German industrial production fell -0.3% m/m in November, an unexpected contraction as strong orders inflow in October and November boosted hopes for a rebound in activity.

Lane: ECB can do more if data shows its necessary. New Irish central bank head Lane, who replaced Hononan, said that even after the adjustment of QE in December “its important to say that no door has been closed. If the data flow over the next number of months is that more needs to be done, more can me done. In other words, it’s now becoming a more normalised instrument that every number of months the analysis can be updated and that if more needs to be done, more can be done”.

Chinese markets opened up in a better mood after authorities suspended circuit breakers overnight prior to their reopening, with the Shanghai Comp opening 2.2% higher and the CSI300 some 2.4% firmer, while the onshore yuan initially rallied to 6.5640 compared to 6.5945 lows on Thursday before quickly backpeddling to the 6.5850 area. It may take a while for the PBoC adviser story to sink in, which called for a 10-15% devaluation of the yuan in a single move along with capital controls. Japan’s N-225 is up some 0.7% to start, but its still early in the session and the U.S. payrolls report looms later.

Fed dove Evans believes a very gradual tightening path is prudent and will help ensure the inflation goal is met, in his speech on Managing the Dots on Monetary Policy. Indeed, his forecast is for a slower pace of hikes than the dot-plot than envisions 4 quarter point moves this year. And, he favors additional accommodation should the economy be hit by an unexpected shock. Slower global growth is offsetting the more positive momentum in the U.S. to some extent, and suggests the funds rate may be headed for a “lower resting point” than has historically been the case. He reiterated there’s no predetermined path of tightening, and the “road ahead may need to be modified” based on incoming data. The 5% unemployment rate is near full employment and indicates the Fed has made great progress, but there’s still some slack in the system, leaving the Fed short of its employment mandate. Evans is not a voter this year.

Bank of Canada Outlook: Poloz maintained a constructive view on Canada’s ongoing adjustment to the terms of trade shock that was wrought by the plunge in oil and commodity prices. On oil, he did not seem concerned over the most recent bout of weakness, saying “adjustments have to happen” and there is nothing policy makers can do about the price of oil.

Main Macro Events Today

US Non-Farm Payrolls: December employment is out on Friday and should reveal a 200k (median 201k) headline that follows a 211k addition in November. We expect the unemployment rate to remain steady at 5.0% (median 5.0%) for a third month. The release faces some upside risk from firm ADP readings, a slight bounce in producer sentiment and continued restraint from initial claims
US Wholesale Trade: November wholesale trade data is released Friday and should show sales unchanged (median unchanged) on the month with inventories down 0.1%. This follows respective October figures which revealed a flat rate for sales and a 0.1% decline for inventories. The already released November factory goods data had sales up 0.2%, inventories down 0.3% and orders down 0.2%. Data in line with our forecast would leave the November wholesale I/S ratio steady at 1.31 for a fourth month.

Canada Employment: We expect employment, to rise 10.0k in December after the 35.7k plunge in November. Canada’s job market has been hit by onetime factors in recent months, which makes for a more challenging than usual forecasting task for December. And education payrolls rose just 6.0k in November after the 3.6k dip in October and 51.3k plunge in September that was the largest on record. Perhaps the make-up for September’s loss will happen in December? An as-expected gain would be welcome news given the recent run of disappointing data, consistent with the BoC ongoing patience on growth.

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